The average 401(k) balance rose 50% between 1999 and 2005 to a hefty sum of $102,014, according to a study released by Employee Benefit Research Institute and the Investment Company Institute. This period, of course, includes the huge drop in 2001 (dot-com bust anyone?) and the miraculous rise from the ashes starting in 2002 (had to start sometime). That, however, is the not the most interesting part of the study, here it is:

The average account balance in 2005 among workers in their 20s who have had accounts since 1999 was $24,169. For those in their 30s, it increased to $50,930, while for those in their 40s it rose to $91,848. Workers in their 50s had an average account balance of $127,766, while the average for those in their 60s was $140,957.

If you’re a benchmark type of person and you keep track, how do your account balances compare to the averages listed above? Personally, my 401(k) balance has hovered around but has yet to break $50,000 – a result of both contributing a lot and the tremendous growth of emerging market funds (and subsequent semi-drop). As for stocks and bonds, I have the vast majority involved in stocks and very very little in bonds (very very very little!) unlikes the stats mentioned in the article.

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5 Responses to “Did Your 401K Balance Increase 50%?”

I just turned 30, but mine is probably around $75,000 (I don’t have the numbers with me). For a minute I thought that the implication was that 401k’s had gained $50K in value, but then I realized that in 7 years, people could have added something like $84K in new contributions. I guess it’s good because it’s an average, but I was really hoping to see that everyone’s had grown 50% before accounting for new contributions.

The stat for people in their 20s is a little misleading (not much, just a bit). In 2005, who were the people in their 20s who’d had 401(k) accounts since 1999? I don’t know this for certain, but I would guess mostly 28- and 29-year-olds. It’s a pretty narrow segment of the 20-something demographic.

I only bring this up because if you’re a benchmark type of person and you’re in your 20s, you may be thrown off by this stat. The $24,169 figure is most likely skewed toward the high end of the range of 401(k) balances for people in their 20s because it’s only counting people that have been saving for 6 or more years. Whereas the figures for the other age ranges are probably good marks for where you should be mid-range (i.e. mid-30s, mid-40s, etc.), for the 20-somethings it’s more like a mark of where you should be toward the end of your 20s.

For what it’s worth, I am a benchmark type of person; it’s good to track progress. But I don’t like this particular benchmark. It’s important to keep in mind what your benchmark actually means. In this case, it’s “Are you ahead, behind, or even with the national average?” But what does the national average have to do your quality of life in retirement? Probably nothing. It’s much better (but also much harder) to establish your own benchmark by calculating your anticipated retirement needs and backtracking to the present day based on your expected annual savings and expected investment rate-of-return.

Now (stepping off my soapbox) I’ve never gone through the trouble of actually performing those calculations, but I still think it’s a good idea, and one of these days I’ll get around to it.

My wife and I are just entering our 30s, and each just broke $100K in our 401Ks this year. We’ve been contributing since 1998 (though only a half year that year).

I enjoy the comparisons, but it’s a lot more meaningful if you can compare people with similar age and income. I’d expect to look pretty bad next to some lawyer who works 90 hours/week and just made partner at age 30. But it’s not really meaningful to compare an engineer’s savings rate to a retail worker’s savings rate.

And the size of one’s retirement savings is really only useful if it takes into account the income (and thus, to some degree, lifestyle) of the saver as well. A $500K nestegg may be plenty for someone who’s lived on $20K his whole life, but may be insufficient for someone who’s making $100K.

It doesn’t matter how much you make but how much you save. You only can save 14 K a year. So the partner you mentioned above can only save as much as you and your wife.
500K is 500K, I don’t see people who makes 100K a year saying “I don’t need 500K”

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